E-Commerce Price Dynamics Under Supply Chain Pressure: Does Shock Pass-Through Diminish?

This study investigates whether the rise of retail e-commerce acts as a buffer for price shocks during periods of elevated supply chain pressure. We examine price dynamics using an interactive panel local projection approach (Jordà, 2005) on a unique dataset that combines regional price dispersion measures with global supply chain shock indices. Our findings indicate that global supply chain shocks significantly increase the overall price level (consumer price index). However, the pass-through of these shocks to consumer prices is somewhat attenuated in environments with higher e-commerce penetration: in high e-commerce settings the initial CPI response to a supply shock is more muted compared to low e-commerce contexts, although the difference is modest and not persistent. Moreover, we do not find strong evidence that supply chain disruptions systematically affect price dispersion across regions or products. These results suggest that e-commerce’s price-equalizing effect – via improved inventory management and alternative sourcing – may delay or soften the impact of global supply shocks on local prices. The study contributes to the price stability literature by highlighting the potential of the digital marketplace to mitigate inflationary shocks and offers insights for policymakers regarding the macroeconomic role of e-commerce in shock transmission.